Indian Insurance Industry

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May 30, 2022

Insurance demand is positively correlated with economic growth and grows at a multiple to the GDP. FY23 has started on a strong note, and LIC’s growth momentum over the past few months comes ahead of its initial public offering.
CareEdge expects the life insurance industry to continue to grow at around 12-14% over a three-to-five year horizon. The growth drivers include pandemic induced demand for protection plans (additional repricing of these plans could also impact premium), younger demographic opting for pure protection plans driving insurance coverage, intense push to increase insurance coverage, especially in the rural populace, product innovations/customization, higher demand for retirement products such as pension/annuity coming from an ageing population coupled with low availability of government-sponsored social security mechanisms and rising awareness of retirement planning, and multiple channels being coupled with enabling digitalised payments infrastructure.
However, large ticket ULIPs could be impacted as w.e.f. April 2021, income earned on contribution beyond Rs. 2.5 lakh per annum in ULIPs has become taxable thereby reducing the attractiveness of ULIPs and pushing fund flows to the mutual fund ELSS schemes.
The non-life insurance industry has closed its FY22 journey on a strong note. The annual FY22 growth has continued to be driven by the health segment and by the private sector which grew at a significantly faster pace (growth of 14.8% in FY22) compared to the public sector (growth of 6% in FY22, which has been hampered by a lack of capital and the government planning to infuse around Rs 5,000 crores in three companies to shore up their solvency ratios).
The non-life premiums are expected to be driven by a continued uptick in the health segment even on the higher base (given that covid has generated significant awareness amongst the public and companies are looking to grow in the smaller cities), digital solutions complemented by offline offerings and the planned increase in motor TP premium in FY23.
- CARE Rating, May 2022